class test 1

Q1. the job of manager of a MNC is both challenging and risky comment.
Q2. Explain the importance of balance of payment of a country for managers and
investors .
Q3. Distinguish between direct and indirect quotations. Explain with the help of
an example
Q4. Calculate the arbitrage gain from the following ( euro dollar) quotations:
0.5625 0.5630 ( dealer A)
0.5632 0.5635 ( dealer B)
Q5. A foreign exchange trader gives the following quotes for the euro vs. dollar
spot, one month, three month and six month to a US based treasurer.
Currency pair spot 1 month 3 month 9 month
Euro vs dollar $0.02365/75 6/8 9/6 12/10



Class test 2

Q1. What is meant by transfer pricing ? explain with the help of examples
various methods of determining arm length price.
Q2. What do you understand by term double taxation ? discuss various types of
reliefs available to avoid double taxation .
Q3. Define country risk ? what are the various techniques of assessing country
risk used by mncs ?
Q4. How does foreign direct investment ( FDI) assist MNCS in their business
expansion plan ? explain various factors affecting growth of FDI in developing
countries.



Mid term paper
PART 1
Q1.
1. What are the distinguish features of international financial management?
2. Distinguish between current account and capital account of balance of
payment?
3. If the direct quotation between euro and dollar is $1.20/euro , what will be
the indirect quotation between these currencies?

PART 2
Q2.

1. What do you understand by purchasing power parity ? how is it linked to
determination of exchange rates ?
2. Explain the linkage between exchange rate and balance of payment ?
3. From the data given below , calculate the forward premium / discount
as the case may be :
Currency pair spot rate 3 month forward rate
Rs/ $ 62.15 63.05




PART 3

Q3.

1. What are the broad categories of international transaction classified as
credit and as debit ?
2. Calculate arbitrage gain using the data given below:
Spot exchange rate : rs.61.50/$
3 months forward rate : rs.62.30/$
Interest rate ( per annum)
Rs.12%
DOLLAR $ . 8%